Understanding the SaaS Payroll Bandwagon

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By Dave Foxall

Knowing When SaaS Payroll Software is Right for You

In a white paper (Issues and trends: Assessing and Managing SaaS risk), Grant Thornton printed these bold words, “Although it is young, the Software-as-a-Service (SaaS) sector appears not to be a here-today-gone-tomorrow technology trend, but rather a technology and business model whose time has come.” Time is proving this prediction correct but SaaS business software (including payroll) is still a relatively young and turbulent market and for the organization searching for its next payroll solution, SaaS payroll deployment can still be an unknown quantity. As with any new or emerging technology, it is easy for purchasers to get swept up by the early adoption wave of enthusiasm and seductive marketing-speak. However, you need to be sure that SaaS is right for you and that you are not simply ‘jumping on the bandwagon’. Although SaaS appears can offer easy to use and powerful applications which can be deployed more rapidly (thus generating a quicker time-to-value) the software development skills and experience required to produce and maintain effective SaaS services are highly specialized and buyers must satisfy themselves that a vendor not only possesses that specialized capability but also can leverage it to the customer’s advantage. By understanding of the SaaS market and the drivers behind it, the organization considering SaaS payroll can make an informed decision on whether the market’s direction is relevant to its own future strategy and therefore whether SaaS would be a good fit for payroll management.

What Lies Behind SaaS Payroll Market Growth?

The THINKstrategies white paper, Accelerating the Move to SaaS and Minimizing the Risks: Crossing the Chasm to the Cloud, identified four key macro-market trends driving companies of all sizes to adopt SaaS solutions. Especially as they pertain to the drive towards cloud payroll, these market trends are:

Changing economic conditions - The global financial crisis and continuing slow recovery has forced decision-makers to re-evaluate their capital investments and refocus their limited resources on their core competencies. For larger organizations, this raises the question of whether to maintain in-house expertise for functions such as HR, payroll, and IT; or to rely on external third party service providers.

Changing competitive forces - Globalization and e-commerce have opened up new markets but that change is a two-way street and the widespread broadening of choice in all industries has undercut customer loyalty.

Changing workplace requirements - The increasingly dispersed and technically-proficient workforce has led to more mobile working and a greater leveraging of technology. Consequently, workplace systems (including payroll and HR) must be similarly agile.

Changing technology requirements - Mobile technology and high-speed networks continue to enable employees to work anywhere, creating a need for flexibility of access and therefore new levels of security and reliability in order to perform.

These challenges are unlikely to have been part of the design concern for traditional, on-premises payroll applications. In all probability, such systems were architected with a highly centralized organization in mind; and in many cases are now proving to be too expensive and labor-intensive to acquire, deploy and maintain in the light of the above changing needs. For an organization looking at payroll management for a flexible, scattered, and technologically-enabled workforce operating in a rapid and competitive environment, it may be that SaaS-deployed payroll automation would meet its requirements while providing a higher return on investment and lower total cost of ownership. However, having identified SaaS payroll as a viable long-term strategy, the purchasing organization must make certain that the chosen vendor is similarly viable.

Finding a Vendor That Understands SaaS Payroll

One list of cloud computing companies (www.saas-showplace.com) shows more than 1,900 vendors, including SaaS providers, in more than 90 application and industry segments (and there could be two or three times that number of companies operating worldwide!). The number of new, pure-play, integrated global cloud payroll providers is growing fast and the Grant Thornton survey notes that the size of the sector inevitably implies the existence of vendors that have little industry experience, poor visibility and limited financial support. As well as being certain that they are exploring SaaS for the right organizational reasons, any potential buyer must be able to satisfy themselves that their vendor isn’t bandwagon-jumping either. The usual rigorous software selection process will help but it is also worth being aware of the unique issues that SaaS holds for the provider so as to be in an informed and ‘intelligent customer’ position. The THINKstrategies white paper suggests that compared to traditional software, SaaS development and deployment poses the following challenges:

Multi-tenancy and hosting

Performance and scalability

Security and compliance

Integration with legacy elements

Continuous enhancements and updates

Customer support

These issues should be informing the product architecture, the process management, the quality assurance and control and the infrastructure management of SaaS payroll software. Any vendor should be able to show how their product addresses these challenges.

Final Thoughts on the SaaS Payroll Bandwagon

Organizations are looking for more flexible and economic payroll solutions that can effectively operate in light of economic uncertainties, new competitive challenges and a technology-driven workforce. On-demand SaaS-deployed payroll software can offer a strong alternative to more traditional options managed in-house. However, to fully leverage the benefits of SaaS, software developers and vendors have their own challenges to surmount and the savvy purchaser will want to test product capability as part of the selection process. That said, a Gartner report, SaaS Adoption on the Rise, found that 95% of respondents expected to maintain or grow their SaaS use, indicating buyer strong support for the SaaS market. In a nutshell, buyers must beware the inexperienced vendor and develop their own understanding of SaaS issues in order to make the right choice of payroll software.

As well as being certain that they are exploring SaaS payroll for the right organizational reasons, any potential buyer must be able to satisfy themselves that their vendor isn’t bandwagon-jumping either.